Financial Results for FY2016. May 2017

Transcription

1 Financial Results for FY2016 May 2017

2 Forward-looking Statements This presentation contains statements that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including estimates, forecasts, targets and plans. Such forward-looking statements do not represent any guarantee by management of future performance. In many cases, but not all, we use such words as aim, anticipate, believe, endeavor, estimate, expect, intend, may, plan, probability, project, risk, seek, should, strive, target and similar expressions in relation to us or our management to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions. We may not be successful in implementing our business strategies, and management may fail to achieve its targets, for a wide range of possible reasons, including, without limitation: incurrence of significant credit-related costs; declines in the value of our securities portfolio; changes in interest rates; foreign currency fluctuations; decrease in the market liquidity of our assets; revised assumptions or other changes related to our pension plans; a decline in our deferred tax assets; the effect of financial transactions entered into for hedging and other similar purposes; failure to maintain required capital adequacy ratio levels; downgrades in our credit ratings; our ability to avoid reputational harm; our ability to implement our Medium-term Business Plan, realize the synergy effects of "One MIZUHO," and implement other strategic initiatives and measures effectively; the effectiveness of our operational, legal and other risk management policies; the effect of changes in general economic conditions in Japan and elsewhere; and changes to applicable laws and regulations. Further information regarding factors that could affect our financial condition and results of operations is included in Item 3.D. Key Information Risk Factors and Item 5. Operating and Financial Review and Prospects in our most recent Form 20-F filed with the U.S. Securities and Exchange Commission ( SEC ) and our report on Form 6-K furnished to the SEC on January 13, 2017, both of which are available in the Financial Information section of our web page at and also at the SEC s web site at We do not intend to update our forward-looking statements. We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by the rules of the Tokyo Stock Exchange. Unless otherwise specified, the financial figures used in this presentation are based on Japanese GAAP This presentation does not constitute a solicitation of an offer for acquisition or an offer for sale of any securities Definitions FG: Mizuho Financial Group, Inc. BK: Mizuho Bank, Ltd. TB: Mizuho Trust & Banking Co., Ltd. SC: Mizuho Securities Co., Ltd. RBC: Retail & Business Banking Company CIC: Corporate & Institutional Company GCC: Global Corporate Company GMC: Global Markets Company AMC: Asset Management Company Consolidated Net Business Profits = Consolidated Gross Profits - G&A Expenses (excl. Non-Recurring Losses) + Equity in income from investments in Affiliates and certain other consolidation adjustments Net Income Attributable to FG: Profit Attributable to Owners of Parent 2 Banks: Aggregate figures for BK and TB on a non-consolidated basis (Figures of BK up to 1Q FY2013 are simple aggregate figures of Mizuho Bank and Mizuho Corporate Bank before the merger in Jul. 2013) Group aggregated: Aggregate figures for BK, TB, SC, Asset Management One and other major subsidiaries on a non-consolidated basis Company managerial basis: Managerial figure of the respective in-house company (managerial figures based on results of former business units up to FY2015) 1

3 Mizuho Group Holding Company Mizuho Financial Group Banking Trust Securities Asset Research & Other Major Subsidiaries 1 Management Consulting Mizuho Bank Mizuho Trust & Banking Mizuho Securities Asset Management One Mizuho Research Institute Mizuho Information & Research Institute Trust & Custody Services Bank Mizuho Private Wealth Management (rounded figures) One of the Broadest Customer Bases among Japanese Financial Institutions Individual Customers 24mm Comprehensive Securities Accounts 1.7mm SME Borrowers, etc. 100K Coverage of Listed Companies in Japan 70% Forbes Global (Non-Japanese Corporate Customers) 80% Credit Ratings (As of May 15, 2017) S&P Moody s Fitch R&I JCR FG A- A1 A- A+ AA- BK/TB A A1 A- AA- AA 1. Also comprised of others such as BK Industry Research Dept., TB Consulting Dept. and Mizuho-DL Financial Technology 2. Top 200 corporations from Forbes Global 2000 (excl. financial institutions) 2

4 Contents Today s Topics 1. FY2016 Financial Results Executive Summary Executive Summary of FY2016 Financial Results P. 6 FY2016 Financial Highlights P. 7 Progress Against the Financial Targets of the P. 9 Medium-term Business Plan KPI P. 10 Earnings Plan of FY2017 P. 11 Net Business Profits Plan by In-house Company P. 12 Balance Sheet Control Initiatives for FY2017 P. 13 Capital Management P. 14 Transition to the Next-Generation IT Systems P Medium- and Long-term Direction for Mizuho Medium- and Long-term Direction for Mizuho P. 17 Strengthen Cost Competitiveness Expense Plan P. 20 Revisiting Branch Strategies P. 21 Improvement for Advanced and Efficient Operations P. 22 Utilizing Technology Streamlining and Optimizing the Organization P. 23 System Structural Reform P. 24 Fundamental Reform of HR Management Fundamental Reform of HR Management P. 31 Diversity & Inclusion P ESG Initiatives Initiatives Related to Environment and Society P. 34 Reference: ESG Related Recognition and Awards P. 35 Progress of Strengthening Corporate Governance P. 36 Corporate Governance Structure P. 37 Customer First (Client-oriented) Business Management P FY2016 Financial Results Overview of Financial Results P. 40 Net Interest Income from Customer Groups P. 41 Non-JPY Funding P. 44 Non-interest Income from Customer Groups P. 45 G&A Expenses P. 46 Securities Portfolio P. 47 Credit Portfolio P. 49 Loan Portfolio Outside Japan P. 50 Strengthen Top-line Profit Allocating Management Resources to P. 26 Achieve Our Growth Strategy Strengthening of Non-interest Businesses by P. 27 Accelerating Group-wide Collaboration Creation of New Business based on Technology P. 29 3

5 Today s Topics FY2016 Overview: Achieved Core Targets Despite the Difficult Business Environment Accumulated Non-interest Income driven by the unified group strategy which partially offset effects of the difficult environment such as negative interest rates Achieved the intermediate target (JPY 250bn) for cross-shareholdings disposal through steady progress Distributed dividends in accordance with the initial estimate by achieving the planned Net Income Attributable to FG Future Direction for Mizuho: Initiatives for Medium- and Long-term Growth Strengthen cost competitiveness through fundamental structural reform Strengthen top-line profit that supports sustainable growth Fundamentally reform HR management and nurture a culture that promotes proactive actions Continued improvement as the front-runner in governance 4

6 1. FY2016 Financial Results Executive Summary 2. Medium- and Long-term Direction for Mizuho 3. ESG Initiatives 4. FY2016 Financial Results 5

7 Executive Summary of FY2016 Financial Results (consolidated, JPY bn) FY2016 YoY Net Business Profits Non-Interest Income was accumulated through large scale transactions mainly in Japan, but it was not sufficient enough to absorb the impact of negative interest rates and the slowdown in sales of investment products, etc. - Expenses increased despite continuous cost reduction efforts Credit-related Costs Reserves for possible losses based on appropriate credit management resulted in Credit-related Costs though the amount was maintained within FY2016 plan (-JPY 60.0bn) Net Gains (Losses) related to Stocks Exceeded the FY2015 results due to the favorable equity market performance in the latter part of the fiscal year in addition to steady reduction of cross-shareholdings Net income Attributable to FG Achieved the FY2016 plan. Although Consolidated Net Business Profits decreased YoY, managed to offset the effect due to Net Gains (Losses) related to Stocks that over-achieved the plan as well as through onetime profits such as the Extraordinary Income associated with the establishment of Asset Management One CET1 Capital Ratio * (excl., Net Unrealized Gains on Other Securities) % (9.27 %) 0.52% (0.50%) - Steadily improved CET1 Capital Ratio toward the Medium-term Business Plan target by accumulating Retained Earnings * Basel III fully-effective basis. FY2015 ratio includes the Eleventh Series Class XI Preferred Stock 6

8 FY2016 Financial Highlights (1) 1 Loans Market Derivatives Deposits Impact of Negative Interest Rates Impact on BK Gross Profits FY16 estimate -JPY 30bn -JPY 15bn -JPY 15bn +JPY 20bn FY16 results Within the expected range Total -JPY 40bn Accounted for approx. 30% of the decrease of BK Gross Profits Largely in line with the estimate 3 (JPY bn) FY (group aggregated) Exchange rates FY16 Non-interest Income Impact of slowdown in investment products sales was partially offset by accumulation in Non-interest Income driven by the unified group strategy - Negative impact from the strengthening of JPY was approx. JPY 23bn Remained flat after considering the impact of changes in exchange rates P.42 Fared well under the difficult environment 2 Net Interest Income P.38 4 Bond Portfolio (2 Banks) P.44 Loans in Japan Net Interest Income (YoY) Average Balance (JPY tn) FY15 (2 Banks) JPY 521.1bn (-JPY 43.3bn) Loan and Deposit Rate Margin (bp) 0.91 FY16 Loans outside Japan * Net Interest Income (YoY) Average Balance (USD bn) FY15 JPY 166.8bn (-JPY 9.0bn) Loan Spread (bp) FY16 Loans outside Japan continued to increase moderately Declining trend continued 15.6 JGBs Net Gains/Losses related to Bonds (FY16) Average Balance (JPY tn) 10.3 Ave. Remaining Period (yrs) Mar-16 Sep-16 Mar-17 Non-Japanese Bonds Average Balance (JPY tn) JPY 96.5bn Ave. Remaining Period (yrs) Mar Sep Mar-17 Appropriately responded to market volatility Remained sound * Net Interest Income is on 2 Banks basis, average balance and loan spread is on BK (including major banking subsidiaries) basis 7

9 FY2016 Financial Highlights (2) 5 (JPY bn) Revised Original FY16 Plan (consolidated) FY16 Results Credit-related Costs - Credit-related Costs were within the FY2016 plan although appropriate credit management resulted in reserves for possible losses Maintained soundness of the balance sheet P.49 Kept under control Non-JPY Funding Non-JPY deposit and loan structure (USD bn) (BK, incl. major subsidiaries outside Japan) Non-JPY Loans Non-JPY Deposits Proportion of Deposits to Loans 76% 71% Mar Mar-17 Continuously strengthened non-jpy deposits base P.44 Over 70% loan coverage by deposits 6 Acquisition cost balance ,847.1 Mar-16 1,687.5 Mar-17 Cross-shareholdings Japanese Stocks (Consolidated) - Steady disposal JPY 242.1bn Net Gains/Losses related to Stocks (FY16) (JPY bn) contributed to achieving the target (reduce approx. JPY 250bn by Mar-17) - Continuously aim to achieve the Medium-term Business Plan (reduce JPY 550bn by Mar-19) Reduced JPY 275.3bn from FY15 on a cumulative basis P.48 8 BIS Capital Ratio P.14 Achieved the intermediate target CET1 Capital Ratio Net Unrealized Gains on Other Securities 10.85% 2.1% 8.77% Mar-16 (Consolidated) 11.37% 2.1% 9.27% Mar-17 - CET1 Capital Ratio (excluding Net Unrealized Gains on Other Securities) improved to 9.27% through accumulation of retained earnings CET1 Capital Ratio improved steadily Steady improvement 8

10 Progress Against the Financial Targets of the Medium-term Business Plan Financial Targets for FY2018 Progress Against the Major Financial Targets [ ] FY2016 Results CET1 Capital Ratio 1 Approx.10% [9.27%] CET1 Capital Ratio (excluding Net Unrealized Gains on Other Securities) 8.77% 9.27% Approx. 10% (JPY bn) Cross-shareholding Disposal 1, JPY 275.3bn 1, ,687.5 Reduction Plan for FY15-FY16 JPY 250bn Reduction Amount JPY 550bn Consolidated ROE 2 Approx. 8% [8.5%] RORA (Net Income Attributable to Owners of FG) Approx. 0.9% [0.9%] Mar-16 Mar-17 Mar-19 Proportion of Non-interest Income Mar-15 Mar-16 Mar-17 Mar-19 Expense Ratio 66.0% Group Expense Ratio 3 Cross-shareholdings Disposal Approx. 60% Excluding expenses related to the Next-Generation IT Systems, etc.: higher 50% level FY2020: aim for the mid-50% range JPY 550bn 4 Noninterest Income 54% 46% FY15 Net Interest Income Noninterest Income 54% FY16 Net Interest Income 46% FY18 Approx. 60% 65% 60% 55% 60.0% Approx. 60% level FY15 FY16 FY18 1. Basel III fully-effective basis (based on current regulations), excluding Net Unrealized Gains on Other Securities 2. Excluding Net Unrealized Gains on Other Securities 3. Group aggregated 4. Shares listed on the Japanese stock markets, acquisition cost basis, cumulative amount from FY15 to FY18 9

11 KPI RBC Balance of Investment Products RBC management basis, rounded figures Shift from Savings to Investment/ Asset Building 1 RBC CIC M&A 2 One MIZUHO Strategy CIC ECM 3 Underwriting amount basis One MIZUHO Strategy RBC CIC GCC Foreign Currency-denominated Customer Deposits BK, management account Balance Sheet Control (JPY tn) 35 +JPY 10tn Large Corporations FY16 No. of Deals: No. 1 Amount: No. 1 FY18 No. 1 5th or above 3rd 4th 2nd Mar. 16 estimate (USD bn) % 4 Mar-16 Mar-17 Mar-19 SMEs and Middle market Corporations No. 1 among the three Japanese mega-banks (No. of deals) No. 1 among the three Japanese mega-banks FY15 FY16 FY18 Mar-16 Mar-17 Mar-19 Overseas Non-interest Income GCC 5 6 GCC AMC 7 GMC Group aggregate, GCC management basis, rounded figures Strengthen Ancillary Transactions (USD bn) % U.S.DCM Underwriting amount basis One MIZUHO Strategy 9th 9th 10th or above Net increase in publicly offered equity investment trusts (excl. ETFs), rounded figures (JPY tn) 0.8 Publicly Offered Investment Trusts Shift from Savings to Investment/ Asset Building +JPY 0.4tn (JPY bn) 300 Sales & Trading Profits GMC management basis, rounded figures Business Promotion to Investors % FY15 FY16 FY18 FY15 FY16 FY18 FY15 FY16 FY18 FY15 FY16 FY18 1. Aggregate of individual and corporate customers 2. Source: Thomson Reuters (Any Japanese Involvement, excl. real estate deals) 3. Source: Thomson Reuters (Total Domestic and Cross-border Equities). 4. Foreign currency-denominated customer deposits, planned amount versus Mar-16 estimate 5. Excl. Commitment Fees and Guarantee Fees, etc. 6. Source: Dealogic. Bonds with issuance amount of USD 250mm and above issued by investment grade U.S. corporations 7. FY15 Results: Simple aggregate figures for Mizuho Asset Management, DIAM and Shinko Asset Management, FY16 Results and FY18 Plan: Asset Management One non-consolidated basis 10

12 Earnings Plan of FY2017 Earnings Plan of FY2017 (consolidated) Annual Cash Dividends for FY2017 (Estimates) FY16 FY17 (JPY bn) Results Plan YoY Consolidated Net Business Profits Credit-related Costs Net Gains (Losses) related to Stocks Ordinary Profits Net Income Attributable to FG JPY 603.5bn Extraordinary After factors deducted deducting extraordinary factors JPY 503.5bn Breakdown of Net Income Attributable to FG (rounded figures, JPY bn) Trading & Others Consolidated Net Business Profits Customer Groups 80.0 G & A Expenses Credit-related Costs Net Gains and Losses related to Stocks Common Stock: JPY 7.5 per share (dividend payout ratio: 34.6%) (Interim cash dividend payments: JPY 3.75) Others * 89.0 JPY 550.0bn Lower JPY 600bn level Increase Non-interest Income Recover Sales & Trading-related profits Promote cross-shareholdings disposal FY2016 Plan based on: O/N interest -0.10%, 3M TIBOR 0.05%, JGB10y 0.00%, Nikkei Stock Average JPY 19,800, JPY 115/USD * Includes increase / decrease of corporate tax, etc. FY2017 (plan) FY2018 (plan) 11

13 Net Business Profits Plan by In-house Company (group aggregate, management account, rounded figures) (JPY bn) FY2016 Preliminary 1 FY2017 Plan YoY Policy Initiatives RBC CIC Materialization of the shift from savings to asset building - Differentiation by providing consulting services on an integrated basis among banking, trust and securities functions - Strengthening of sector-based business promotion on a global basis - Improvement in profitability through rebalancing of assets GCC GMC AMC In-house Company Total Consolidated Net Business Profits Acceleration of the Global 300 strategy - Thorough strengthening of businesses including transaction banking and DCM/ECM/M&A - Seeking to reconstruct the bond portfolio at the appropriate timing while thoroughly pursuing profitability - Improvement in profitability through prioritized allocation of management capital in sales and trading - Provision of products such as publicly offered investment trusts and solutions based on highly specialized investment capabilities - Further pursuing the appropriate consultation approach for pensions 1. Recalculated the FY2016 results based on the FY2017 management account rules. JPY 37bn difference between In-house Company Total and Consolidated Net Business Profits is due to adjustment of management account which is not attributable to the In-house Companies 2. GMC net business profits including Net Gains related to ETF is JPY 345bn (preliminary) 12

14 Balance Sheet Control Initiatives for FY2017 Strengthen balance sheet control to enhance resilience toward changing external environment and tightening regulations Overview of Balance Sheet (Mar-17) consolidated FY2017 Initiatives ( ) represent changes from Mar-16 Loans Loans: JPY 78tn (+JPY 4tn) Deposits: JPY 130tn (+JPY 13tn) - Improve risk-return - Reduce low-profitability assets JPY * Non-JPY * Securities: JPY 32tn (-JPY 7tn) Stock: JGB: Non-JPY bonds: Other Assets JPY 55tn (+JPY 4tn) USD 236.5bn (-USD 1.2bn) JPY 4tn (+JPY 0tn) Cross-shareholdings disposal: -JPY 159.5bn JPY 13tn (-JPY 6tn) JPY 10tn (-JPY 1tn) JPY 89tn (+JPY 9tn) JPY * Non-JPY * Other Liabilities Net Assets: JPY 111tn (+JPY 12tn) USD 179.8bn (+USD 11.3bn) Non-JPY Customer Deposits / Non-JPY Loans = 76% JPY 60tn (-JPY 6tn) JPY 9tn (-JPY 0tn) Leverage Ratio 3.95% Deposits (JPY) - Accelerate the shift from savings to asset building - Increase investment products balance and accelerate the group-wide integrated business promotion Deposits (non-jpy) - Enhance attention toward Non-JPY funding costs including customer deposits - Accumulate customer deposits systematically Securities (stock) - Promote cross-shareholdings disposal to achieve the disposal plan on an acquisition cost basis Securities (bond) - Fully instill early warning system reflecting the external environment conditions - Identify the timing to reconstruct bond portfolio Total Assets JPY 200tn RWA * Breakdown of JPY and Non-JPY on management account basis, rounded figures JPY 61tn Net Assets - Steadily accumulate Retained Earnings in order to achieve CET1 Capital Ratio of approx. 10% 13

15 Capital Management Pursue an appropriate balance between strengthening of the stable capital base and steady return to shareholders Strengthening of the Stable Capital Base Steady Return to Shareholders Medium-term Business Plan CET1 Capital Ratio 1 Target: approx. 10% (as of Mar-19, excluding Net Unrealized Gains on Other Securities) Dividend Policy Steady dividend payout policy with a dividend payout ratio on a consolidated basis of approx. 30% as a guide for our consideration Improve stress tolerance toward changing external changes through steady accumulation of retained earnings Net Unrealized Gains on Other Securities 9.08% 1.2% 2.7% 7.84% 7.76% CET1 Capital Ratio % 10.85% 2.1% 8.77% 11.37% 2.1% 9.27% Cash Dividend per Share of Common Stock Comprehensively take into account management and regulatory environment, progress against the Medium-term Business Plan (CET1 Capital Ratio of approx. 10%), steady dividend payout ratio of approx. 30% and others factors FY16: JPY 7.50 (Dividend payout ratio 31.4%) FY17 (estimated):jpy 7.50 (Dividend payout ratio 34.6% 2 ) Mar-14 Mar-15 Mar-16 Mar Basel III fully-effective basis (based on current regulations). Including the Eleventh Series Class XI Preferred Stocks (the balance as of Mar-16: JPY 98.9bn, mandatory conversion on Jul. 1, 2016) up to Mar Assuming Net Income Attributable to FG for FY17 of JPY 550.0bn 14

16 Transition to the Next-Generation IT Systems For the Next-Generation IT Systems, the highest priority is placed on ensuring quality and safe launching. Thorough tests are currently being conducted - Final quality check is being conducted according to the plan - Investment amount was increased in order to take all possible measures to ensure quality Preparation will be carefully conducted after checking the system quality as it is critical to ensure safe and steady transition. The system migration will be implemented gradually, after thorough rehearsals, etc. (during the migration period, the current and Next-Generation IT Systems will be concurrently operated) Next-Generation IT Systems ahead of Competitors Transition to the Next-Generation IT Systems (Conceptual Illustration) Unification of Core Banking Systems of former BK, former CB and TB - Downsize and streamline the IT systems - Improve response to potential system failures Independent components by business and function - Improve flexibility through a simplified structure - Enable flexible adaptation to new services - Shorten the lead time and reduce costs for new development Cutting-edge Next-Generation Core Banking Systems - Strengthen infrastructure for providing services - Improve operations processing speed Investment amount (estimate): Mid-JPY 400bn range (Existing Systems) BK Former BK System Platform for Banking Business Former CB System Platform for Banking Business TB System Platform for Banking Business Unification of the IT Systems Customer Channel Systems Core Banking Systems Information Mgt Systems Outline of the Next-Generation IT Systems Online Banking, etc. Deposit Internal Terminals Systems for External Connections, etc. Common Operational Infrastructure (in operation since FY13) Component Systems related to Products Remittance Credit Transactions Foreign Exchange Trust Business Systems related to Core Information Management 15

17 1. FY2016 Financial Results Executive Summary 2. Medium- and Long-term Direction for Mizuho 3. ESG Initiatives 4. FY2016 Financial Results 16

18 Medium- and Long-term Direction for Mizuho (1) Heightened uncertainty leads to necessity for foundation building looking beyond our Medium-term Business Plan FY16 Medium-term Business Plan Progressive Development of One MIZUHO FY17 FY18 Business Environment Mizuho s Initiatives Tightening of financial regulations Prolonged negative interest rates US interest rate hike Advances in technology Increase of geopolitical risk - Fully implement the Customer First Principle - Operational Excellence 5 Basic Policies Introduction of the in-house company system Selecting and focusing of business areas Establishment of a resilient financial base Proactive involvement in financial innovation Embedding a corporate culture that encourages the active participation of our workforce Increasing uncertainties against the prospects for significant increase in Gross Profits Necessity of cost structural reform to advance to the next phase of securing competitiveness Begin structural reform from FY17 responding to further environmental change FY17 Important year to build the foundation for reform 重視する方向性 Direction 1. Cost competitiveness Fundamentally reform cost structure 2. Top-line profit Thoroughly strengthen our advantages 3. HR management reform Make the best use of HR 17

19 Medium- and Long-term Direction for Mizuho (2) Promote further structural reform responding to the changes in the economic conditions in and outside of Japan as well as financial regulatory environments Strengthen Cost Competitiveness through fundamental structural reform Strengthen Top-line Profit that supports sustainable growth Fundamentally Reform HR Management to promote active participation of all employees - Revisiting Branch Strategies (p.21) - Improvement for Advanced and Efficient Operations Utilizing Technology (p.22) - Streamlining and Optimizing the Organization (p.23) Reform Head office and group companies Reform organizations outside of Japan Centralize standard operations (response to the revised Banking Act) - System Structural Reform (p.24) - Allocating Management Resources to Achieve Our Growth Strategy (p.26) - Strengthening of Non-interest Businesses by Accelerating Group-wide Collaboration (p.27) From savings to asset building Consultation business promotion toward SMEs DCM/ECM Build sector-based business promotion structure on a global basis - Creation of New Business based on Technology (p.29) (white space) Start personal banking business (J. Score) Initiatives related to digital wallet - Development-focused HR Management and Promotion for Each Employee (p.31) 18

20 Strengthen Cost Competitiveness 19

21 Expense Plan Significant reduction in expenses through the promotion of Operational Excellence and Fundamental Cost Structural Reform Core Expenses Strategic Expenses 10 Operational Excellence effects 23 (Group aggregated, management account, rounded figures) Expense Amount (JPY bn) JPY 1.42tn 45 Breakdown of Core Expenses IT-related : 20 (Branch infrastructure renewal, etc.) Expenses Outside Japan : 15 Taxes, etc. : 10 Investment decision based on management environment Examples of expense reduction through streamlining initiatives Streamlining front-line operations and infrastructure, etc. Integrating systems, etc. Streamlining head office functions Integrating procurement Revisiting operations Structural Reform Task Force Fundamental Structural Reform - Reconsider personnel and expense structures from medium- and long-term viewpoints - Reduce expenses to absorb depreciation burden related to the Next-Generation IT Systems FY2016* FY2017 FY2018 FY2020 Operational Excellence Effects (vs FY2015) JPY 12bn JPY 35bn JPY 70bn JPY 100bn Expense Ratio 66.9% Higher 60% level Approx. 60% Mid-50% range * Figures for FY2016 are recalculated based on FY2017 management account rules 20

22 Revisiting Branch Strategies Achieve a good balance between improved customer services and reduced costs through the hub-and-spoke model and the harmonized omni-channel First as Japanese bank Hub-and-spoke Model on a Banking, Trust and Securities Integrated Basis Integrate approx. 800 BK/TB/SC branches* into approx. 120 areas and establish a hub-and-spoke model Digital channel Spoke Branch Area One MIZUHO Monitored through area ROE SC * Total of all BK, TB and SC offices (incl., sub-branches and sales offices) BK Joint offices Branch EveryOne Consultant Branch operation staff will focus more on customer relationship management Acceleration through the transition to the Next-Generation IT Systems TB Region-based approach Unique as a Japanese mega bank Hub Branch Network covering all Prefectures in Japan Contribution to Regional Revitalization Spoke Market-driven branch network allowing flexible changes Hub Branch Area Core Provide full banking, trust and securities, as well as wholesale and retail services through face-to-face channel Spoke Branch Less HRs Light weight Focus on consulting services One-stop service of banking, trust and securities at all branches by using digital channel Achieve a good balance between increased Gross Profits and reduced cost Faceto-face channel Digital channel Harmonized Omni-channel Promote differentiation strategies utilizing FinTech Utilize AI Transaction data collection and customer presentation support Banking, trust and securities integrated consulting service Strengthen Non-interest Income in asset management and inheritance businesses Comfort Certainty Specialty Utilize FinTech Utilize Big Data Find new target customers Operational efficiency utilizing technology Improve both productivity and customer satisfaction by enhancing remote channel Convenience Innovativeness Safety 21

23 Improvement for Advanced and Efficient Operations Utilizing Technology Aim for improvement in productivity through streamlining operations utilizing technology Operations Reform Utilizing Blockchain Operations Reform Utilizing RPA, etc. Data collection [ ] Analysis Processing [Check] [ ] Data collection [ ] 1 [Check] Analysis [ Processing] Slips, etc. Slips, etc. OCR 2 1. Input 5. Input 1. Input 2. Output 3 Input 4. Output 5. Input 2. Output 3. Input 4. Output Share transaction information among participants utilizing blockchain High speed processing Anti-counterfeit Anti-tampering Cost reduction Systems Systems Systems Systems Systems Systems Automate standard operations conducted manually Time reduction Quality improvement Shift of HR to value added operations Cross-border settlement Share transaction details among participants Completed proof of concept Trade settlement Share trade documents among participants Actual transactions scheduled in June 2017 FY16 FY17 Trial phase 1. Robotic Process Automation 2. Optical Character Recognition Trial operations through RPA software development Operations sorting phase Sort out subjected operations and develop implementation rules Full implementation phase Start automation of approx. 120 processes and operations currently conducted by nearly 500 people 22

24 Streamlining and Optimizing the Organization Reduce costs and improve productivity by streamlining and optimizing the organization on a group-wide basis Challenges Structural reform to streamline and optimize the organization Revisit existing operations and organization for improved efficiency Eliminate waste, inconsistency and unreasonableness Promote structural reform based on the strategic positioning of each group company Share and standardize operations that support integrated banking, trust and securities management in and outside Japan Focus Head Office Reform Group Company Reform Organizational Reform Outside Japan Consolidation of Common Operations to Holding Company Actions Streamlining head office operations and eliminating inward-looking work style - Strengthen front-line capabilities - Accelerate decision making - Improve added value of head office operations Alleviation of group company management burden (integrate, internalize, outsource) Consolidation of common operations (shared services) Improvement of front-line productivity Optimized allocation of corporate functions and operations - Optimum allocation to remove duplicated operations and organizations Revisiting derivatives business structure Consolidation of common operations in the light of the revised Banking Act 23

25 System Structural Reform Dual focus on system structural reform and IT operation process reform for structural improvements IT Operation Process Reform IT Strategy Comprehensive improvement in operational efficiency incorporating advanced technologies System Structural Reform Enhance infrastructure through cloud services, etc. FY09 Establishment of private cloud Promoted systems migration from FY09 Integration of 125 systems resulted in JPY 16.8bn investment cost reduction Utilized public cloud in digital innovation and software services FinTech FY17 Will further reduce costs through hybrid cloud structure combining public cloud and private cloud Developed a systems roadmap reflecting both IT and business strategies through the collaboration of both IT and business divisions under the in-house company system Online banking for SWIFT* corporate customers Cost reduction through centralization Utilization of public cloud Improvement to hybrid cloud Cost reduction through group-wide integration Make it fast and inexpensive and keep it efficient Improve productivity in IT development utilizing RPA and AI (automated tests, etc.) Prepare infrastructure to utilize Big Data and other data Integrate and automate large volume auxiliary businesses on a group-wide and global basis (Contract payment operations, license administration operations, etc.) RPA AI Big Data RPA Business Strategy Improve efficiency of products and services based on business portfolio analysis, etc. Integrate duplicate systems of legacy companies * Society for Worldwide Interbank Financial Telecommunication Improve efficiency of system operations through data center integration and operations standardization/ automatization on a group-wide basis RPA 24

26 Strengthen Top-line Profit 25

27 Allocating Management Resources to Achieve Our Growth Strategy Extensively shift management resources to focus areas based on business portfolio analysis Business Portfolio Analysis Management Resources Rebalancing High Attractiveness of Market Low Streamline/ Revisit Areas Focus Areas Streamline/ Revisit Areas Crossshareholdings Low profitability loans Low profitability transactions Strengthen Non-interest Income through group-wide collaboration M&A/DCM/ECM Face-to-face consulting Global 300 Focus Areas Create new business utilizing technology FinTech IT digitalization Low Competitive Advantage High ~FY2017 (plan) ~FY2017 (plan) Quantitative Evaluation Profitability Capital efficiency Volatility In-house company collaboration Qualitative Evaluation Regulatory impact Technology RWA approx. -JPY 2.3tn Head counts RWA Head counts approx. -1,000 FY16 results approx. -JPY 0.8tn approx RWA Head counts RWA Head counts approx. +JPY 3.9tn approx.+1,340 FY16 results approx. +JPY 1.7tn approx

28 Strengthening of Non-interest Businesses by Accelerating Group-wide Collaboration (1) Strengthening Non-interest Income by further accelerating group-wide collaboration Promote initiatives related to shift from savings to asset building Consulting business promotion toward SMEs (JPY tn) Balance of investment products RBC management basis, rounded figures IPO-related businesses SC: No. as arranger 1 2 TB: No. as stock transfer agent No Mar-15 Mar-16 Mar-17 Promote group-wide collaboration No. of customers referred to SC from BK (k) FY14 FY15 FY16 Transition of net inflow of SC clients assets Strengthen financial product capabilities Largest asset management company in Asia Apply our advanced know-how for pension investments to investment trusts and support movements from savings to asset building for individual investors Support customers long-term investment goals by building long-term and diversified asset portfolio for their medium- and long-term asset building % FY15 FY13 FY14 FY15 FY16 Risk money provision Groupintegrated fund provision (BK/TB/SC/CC) The sole Japanese bank Promote group-wide collaboration RBC management basis (JPY 100bn) Mizuho Independent Independent RBC management basis RBC management basis firm A firm B -3 FY13 FY14 FY15 FY16 SC-lead consulting project won via referral from BK 3 Fund 57% FY16 Mizuho Growth Support Fund #2 Early stage companies 29% FY15 Ring-fencing from an early stage SC-arranged IPOs where TB acted as an stock transfer agent Growth support Membership services M s Salon 63% FY16 Network with large corporations Knowledge base Social credibility 1. Prepared by SC based on data from CAPITAL EYE. Top Left basis. Excluding REIT and global offerings 2. Prepared by TB based on disclosure materials of each company, excluding REIT, ETF and PRO MARKET 3. Proportion of cases obtaining lead consultant position 27

29 Strengthening of Non-interest Businesses by Accelerating Group-wide Collaboration (2) Capture the dynamism of global industry activities leveraging our increased presence in the debt market in the flow & in the know Establish a Secure Position in the Debt Market 1 DCM In Japan Japan straight bonds FY14 FY15 FY16 Mizuho SMFG MUFG Japan syndicated loans 1st Outside Japan Americas investment grade corporate bonds FY14 FY15 FY16 Mizuho MUFG SMFG Global syndicated loans 9th Build a Global Sector-based Business Promotion Structure SC Mizuho s strengths Advanced banking and securities integrated model In-house company system: first as a Japanese bank In Japan Sectorbased coverage CFA 3 Strong relationship with major corporations in and outside of Japan Major corporations in Japan / Global 300 TMT Healthcare Consumer Goods Sector-oriented IB collaboration Advisory Differentiated functions Industry Research Dept./ CFAS 2, etc. Capture the dynamism of global industry activities Outside Japan CFAS 2 (IB Coverage) Syndicated loans FY14 FY15 FY16 Mizuho SMFG MUFG 1st FY14 FY15 FY16 MUFG Mizuho SMFG 6th B K BK Client relationship managers Industry Research Dept., etc. Promotion structure Acquisition finance Enhanced relationship status Aim to acquire further transactions Top-down promotion led by executive officers Client relationship managers, etc. 1. Japan straight bonds: aggregate of commercial bills, electric company bonds and bonds for individual investors (Source: I-N Information Systems) / Americas investment grade corporate bonds: Americas, investment grade and bookrunner basis (Source: Dealogic) / Japan syndicated loans: bookrunner basis (Source: Thomson Reuters) / Global syndicated loans: bookrunner basis (Source: Thomson Reuters) 2. Corporate Finance Advisory and Solutions 3. Corporate Finance Advisory 28

30 Creation of New Business based on Technology Aim to develop new business by strengthening business promotion structure Create Next-Generation Business Model through Enhanced Business Promotion Structure Open innovation Flexibly collaborate with other industry, etc. Pursue actual business Materialize added value at an early stage Global expansion Co-creation and information gathering on a global basis Creation of New Business Lending business - Scoring system utilizing Big Data of Mizuho and SoftBank, and AI Expected launch: Summer 2017 Department newly established under the direct control of CEO CEO CDIO 1 New Sole Executive Officer Digital Innovation Dept. Reorganization approx. head 30 counts - Interest rate and facility amount decision based on scores Japan s first score-based lending business Settlement New Platform Third party shareholders Investment Secondment / dual appointment Idea Commercialize Monetize Establish an IOT incubator company (FG non-consolidated) - Issue e-money directly chargeable through the bank account - Provide wallet application for settlement using e-money New settlement business utilizing Big Data Expected launch: Summer Chief Digital Innovation Officer 2. Explanation of business is based on the current estimate 29

31 Fundamental Reform of HR Management 30

32 Fundamental Reform of HR Management Fundamentally reform HR management in order to promote active participation of the employees and to establish a unified group culture Mizuho s Initiatives HR management that respects employees individuality Future executive leader development Globalization of talent and HR management Mizuho s Vision = Fully exercise the potential of all employees Eliminate excess application of HR management based on the starting year at Mizuho and exit from uniform HR management HR management that respects employees individuality Shift to development-focused HR management focused on enhancing each employee s core potential - Encourage active approach to challenges and evaluate learning from failures Extend multi-track HR management to respond to diverse career goals Encourage physical and mental healthcare and develop sound work environment Provide growth opportunities for all employees Globalization of talent and HR management Accelerate the promotion of employees hired outside Japan to management positions Enhance ability of employees in Japan to respond to globalization - Progressive expansion of experience working abroad including increasing first time assignment to offices outside Japan Promote globalization of the head office Assigning the right person to the right position on a global basis Strategic employee rotation Diversity & Inclusion Future executive leader development Implemented Mizuho Future Executive Leader Development Program - Develop leaders through strategic stretch job assignments, training, coaching and feedback, etc. Select candidates on a group & global-wide basis and proactively change and add members Develop leaders who can make changes Strategic employee rotation Well-planned personnel development to support materialization of strategies in various business fields Strategically rotate employee on cross-inhouse company and cross-entity basis to encourage development and establishment of a business field Develop HR that supports implementation of strategies 31

33 Diversity & Inclusion Create new values by promoting development and active participation of a diverse workforce Reform in HR management Develop and assign women and non-japanese personnel to management positions Numerical targets 1 Transform work-life balance management Provide diverse working arrangements to enable long-term retention Change the mindset and behavior Change mindsets on diverse working arrangements and workplace Percentage of women Percentage of locally hired staff in management roles Percentage of paid leave taken by employees and eligible male employees who take childcare leave (Japan) Percentage of employees with disabilities in the workforce (Japan) Target 2 100% FY15 Results 3 30% 30% 50% FY16 Results 3 70% 20% 10% 10% 21% 23% 34% 33% 32% 40% 64% 68% 6% 8% Management position outside Japan 3% 4% General Managerequivalent 9% 11% Manager-equivalent Assistant Managerequivalent or or above above In Japan New graduates (Generalist track) Management positions outside Japan Employees who take paid leave 1.5% 23% Eligible male employees who take childcare leave 2.3% 2.2% 2.1% Employees with disabilities 1. Aggregate of FG, BK, TB and SC except for percentage of employee in management positions outside Japan (women and locally hired staff in management role) that are of BK only 2. Targets are for Jul-19, except for new graduates in (generalist track) that is for employees joining in FY19, employees who take paid leave and eligible male employees who take childcare leave that are for FY18, and percentage of employees with disabilities in the workforce that is for Jun Results are for Mar-16 and Mar-17, except for new graduates (on generalist track) that is for employees joining in FY16 and FY17, and employees who take paid leave and eligible male employees who take childcare leave that are for FY15 and FY16 32

34 1. FY2016 Financial Results Executive Summary 2. Medium- and Long-term Direction for Mizuho 3. ESG Initiatives 4. FY2016 Financial Results 33

35 Initiatives Related to Environment and Society Continuing initiatives for sustainable development of Mizuho and society Continuing proactive involvement in environmental finance Environmental finance results Mar.15 Mar.16 Mar FY14 FY15 FY16 Environmental Finance (JPY bn) BK (No. of participants) Others Finance for environmentallyconscious companies Environment-related Initiatives for the Equator Principles Apply the Equator Principles* for large-scale development project finance transactions to confirm whether sufficient attention has been Europe/Middle Asia/OceaniaEast/Africa Europe/Middle Asia/Oceania East/AfricaAmericas Project Finance < Contents > Wind power Solar power / thermal Biomass Geothermal Hydroelectric Proper waste disposal / recycling business Others JPY 176.6bn JPY 335.5bn JPY 7.0bn JPY 1.3bn JPY 1.9bn JPY 24.2bn JPY 57.6bn given to social risk such as environmental risk and human rights No. of Equator Principles-applied projects signed BK management basis * Equator Principles: Principles to encourage to be consciousness about environment and social issues associated with financing of large scale projects Support financial education to address the social needs such as to improve financial literacy No. of financial education participants Total: approx. 62,000 (FY2006 to FY2016) 6,763 8,015 12,859 FY14 FY15 FY16 Financial Education School visiting lecture Promote Active Participation of a Diverse HR Create new corporate values through active participation of a diverse workforce including different gender and nationality All Mizuho employees Diverse workforce with different gender, nationality, cultural background, etc. LGBT, aged employees, employees with disabilities etc. Support balance among work, childcare and nursing Work from home program Career development support program Changing the mindset toward diverse workplace and working arrangements Improved productivity Improved employee retention Creation of new value 34

36 Reference: ESG-related Recognition and Awards Participation in ESG-related Initiatives Inclusion in Social Responsibility Indices 1 2 UN Global Compact UNEP Finance Initiative Principles for Financial Action towards a Sustainable Society Dow Jones Sustainability Index Asia Pacific MSCI Global Sustainability Index FTSE4Good Global 100 Index UN: Principles for Responsible Investment Equator Principles Montreal Carbon Pledge CDP Climate Change Program Cross Sector Biodiversity Initiative Business and Biodiversity Offsets Programme Morningstar Socially Responsible Investment Index (MS SRI) SNAM Sustainability Index Bloomberg Financial Services Gender-Equality Index Other Awards New Diversity Management Selection Nadeshiko Brand 2016 Semi-Nadeshiko Brand 2017 Platinum Kurumin PRIDE Index Gold rating Health and Productivity Management Organization 2017 Service & Hospitality Award Special award "Kizuna FY2016 Further information : The top three-star ranking HDI-Japan Customer Service Representatives Competitive IT Strategy Company

37 Progress of Strengthening Corporate Governance Continue the progressive reform of governance as a front-runner to enhance our corporate value First as a Japanese Bank Independent outside director will become Chairman of the Audit Committee Chairman of the BOD as well as the Chairmen of all three legally required committees will be independent outside directors * BK, TB, SC will become a Company with First as a Japanese Bank Audit and Supervisory Committee Introduced a full-scale In-house Company System First as a Japanese Bank Announcement of establishing a comprehensive financial services group 2014 Establishing the group wide collaboration among banking, trust and securities functions Commencement of One Bank and One Securities Structure First as a Japanese Mega-bank First in Japan Filed the Corporate Governance Report in compliance with the Corporate Governance Code Disclosed the Policy Regarding Cross-holdings of Shares of Other Listed Companies and the Standards Regarding the Exercise of Voting Rights Associated with Cross-shareholdings Transformation into a Company with Three Committees Chairman of the BOD as well as all members of the Nominating and Compensation Committees became independent outside directors * Chairmen of the Board of Directors (BOD) and the three legally required committees (plan) Chairman of the Board of Directors Chairman of the Nominating Committee Chairman of the Compensation Committee Chairman of the Audit Committee Hiroko Ota Takashi Kawamura Tatsuo Kainaka Tetsuo Seki Professor, National Graduate Institute for Policy Studies Past Minister of State for Economic and Fiscal Policy Past Chairman and President, Hitachi, Ltd. Attorney-at-law, Past Justice of the Supreme Court, Past Superintending Prosecutor of the Tokyo High Public Prosecutors Office Past President, The Shoko Chukin Bank, Ltd. Past Executive Vice President, Nippon Steel Corporation 36

38 Corporate Governance Structure General Meeting of Shareholders Holding Company (FG) Election of Directors Determines the contents of proposals regarding the appointment and dismissal of directors Supervision and Audit Management Independent outside director (non-executive) Non-executive internal director Executive internal director President & Group CEO Banking (BK) Trust (TB) Securities (SC) Companies Units Groups Board of Directors The Chairman shall, in principle, be an independent outside director Non-executive directors shall comprise a majority of the directors Chairman Independent Outside Director Session - Appoints and dismisses executive officers - Delegates decisions on business execution - Supervises the execution of duties Market-driven approach based on customer segments Further enhancement in expertise and firm-wide utilization of functions Determines the compensation Audits the execution of duties Planning, management and internal audit Determines the compensation for each individual executive officer Nominating Committee Compensation Committee Audit Committee Audits the legality and appropriateness of the execution of duties by executive officers RBC, CIC, GCC, GMC, and AMC Global Products, Research & Consulting Units Determines the contents of proposals for general meeting of shareholders regarding the appointment and dismissal of directors All members, in principle, shall be independent outside directors Determines the compensation for each individual director and executive officer All members, in principle, shall be independent outside directors Human Resources Review Meeting Audits the legality and appropriateness of the execution of duties by directors and executive officers Majority of members shall be independent outside directors Risk Committee Independent outside director will become chairman Strategic Planning, Financial Control & Accounting, Risk Management, Human Resources, IT & Systems, Operations, Compliance and Internal Audit Explanatory Notes Independent outside director (non-executive) Non-executive internal director Executive internal director Structure after the 15th Ordinary General Meeting of Shareholders (Plan) 37